Singapore

THE manager of OUE Commercial Real Estate Investment Trust (OUE C-Reit) said it is divesting a 50 per cent stake in the Reit's OUE Bayfront property based on an agreed value of S$1.27 billion, or S$3,170 per square foot, to a special purpose vehicle (SPV) managed by Allianz Real Estate.

Allianz separately announced the agreed transaction value is S$634 million subject to closing, which is slated for end-February 2021. The real estate firm issued a press statement on Tuesday confirming previous market speculation that the acquisition is on behalf of the National Pension Service of Korea, in addition to the Allianz group of companies.

This comes after The Business Times in November 2020 reported both parties were in exclusive due diligence with a view to buying a partial stake in the building, which OUE C-Reit's manager later on affirmed but said there was no certainty any transaction would materialise at the time.

OUE Bayfront comprises an 18-

storey Grade A office asset, a conserved tower building and an overhead pedestrian link bridge with retail units. It was independently valued at S$1.18 billion by Cushman & Wakefield as at end-2020.

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The S$1.27 billion agreed value commands a premium over the property's purchase consideration of S$1 billion by 26.1 per cent, said OUE C-Reit's manager in a late night filing on Monday.

OUE C-Reit is expecting to net about S$262.6 million of proceeds. The manager said this will provide it with the financial flexibility to pare down debt and undertake accretive acquisitions, among others.

Assuming the estimated net proceeds are used to repay loans, the Reit's aggregate leverage is expected to improve from 40.3 per cent as at end-September 2020 to 33.6 per cent on a pro forma basis.

For the purposes of OUE Bayfront's sale, a 50:50 limited liability partnership known as BPH Propco has been formed between the Reit and Allianz's SPV Acre Angsana, with DBS Trustee as trustee of the Reit.

DBS Trustee will guarantee a minimum net property income (NPI) of S$50 million and S$52.5 million for the first and second year respectively following completion of the divestment, and subject to an aggregate cap of S$6 million.

Based on OUE Bayfront's annualised NPI of S$45.8 million for the nine months ended Sept 2020 and the agreed value, the estimated net property yield is 3.6 per cent per annum.

Post completion of the divestment, the manager says OUE C-Reit will remain underpinned by the resilient office segment, while its Singapore properties continue to anchor the portfolio.

Units of OUE C-Reit closed half a Singapore cent or 1.3 per cent higher at 39 cents on Tuesday.